Investment case

SIG is a leading distributor of specialist building products in Europe. The Group has a product and service offering of significant scale with strong positions in its three core markets of Insulation and Energy Management, Interiors and Exteriors.

SIG is positioned to continue to achieve market share growth as its branch network develops and matures. As it realises the benefits of cross-border and inter-company synergies, and continues to adopt best practice across its portfolio, the Group will generate sustainable long term growth in shareholder value.

  • Refocusing on customers and sales growth
  • Leveraging the Group’s specialist distribution model
  • Positive regulatory developments especially in insulation and energy management
  • Increasing market penetration
  • Greater exposure to key national account customers
  • Geographical diversification and sector balance – residential and non-residential; new build and RMI; public and private
  • Diversified customer base from major construction companies to small local contractors
  • Specialist expertise which acts as a barrier to entry
  • Strong customer relationships based on high service levels, technical expertise and supply chain management competence
  • Proactive and effective credit management
  • Seek an improvement in operating margins from:
    • enhanced product mix
    • network optimisation
    • management of sales and purchase prices
    • economies of scale
  • 100% operating cash conversion over the medium term
  • Focus on ROCE
  • Maintain a progressive dividend policy with cover of 2-3x over the medium term

Post-tax Return on Capital Employed (“ROCE”) is one of the key metrics for the Group and is calculated as underlying operating profit less tax, divided by average net assets plus average net debt.  

In 2016 SIG’s ROCE decreased by 210bps to 9.4% (2015: 11.5%).   Going forward SIG remains committed to increasing ROCE.   As well as taking a disciplined approach to its capital management, SIG seeks to achieve this through further improvements in its gross and operating margins.